VimpelCom Sells 51% Djezzy Stake to Algeria to Reduce Debt

April 18 (Bloomberg) -- VimpelCom Ltd. agreed to sell a
majority stake in its Algerian unit Djezzy to the North African
country’s government, providing it with $4 billion in cash and
dividends that will allow it to cut debt.

VimpelCom, co-owned by Russian billionaire Mikhail Fridman
and Norway’s Telenor ASA, agreed to sell 51 percent of Orascom
Telecom Algerie SpA, or Djezzy, to the Algerian National
Investment Fund for $2.64 billion, VimpelCom said today in a
statement. Djezzy will also pay a $1.86 billion dividend to
VimpelCom’s Global Telecom Holding SAE unit before the
transaction closes.

The phone company is striving to reduce $27.5 billion of
debt accumulated partly from acquisitions of assets in Italy,
Algeria and Asia from Egyptian billionaire Naguib Sawiris. It
also ends an ownership dispute in which the Algerian government
forbid Djezzy from paying dividends to its parent company and
made tax claims on the unit.

“It’s a milestone for the company, ending a three-year-long dispute in Algeria,” VimpelCom Chief Executive Officer Jo
Lunder said by phone. The deal will release $4 billion of cash
for VimpelCom after tax, Lunder said.

Operational Control

VimpelCom will keep operational control of Djezzy and
continue consolidating the asset on its balance sheet. The unit
plans to develop a third-generation mobile network to tap growth
in Algeria, where it has 17.6 million users.

The government had restricted Djezzy from importing new
equipment during the dispute, which stunted its expansion. The
deal comes ahead of arbitration that was scheduled to begin next
week, Lunder said.

“Resolving the dispute in Algeria is good news for
VimpelCom,” Sergey Libin, a Moscow-based analyst at
Raiffeisenbank, said by phone. “This will allow to unlock their
accounts in the country and bring in new equipment to grow
there.”

Djezzy will pay a fine of about $1.3 billion to settle the
dispute over tax claims with the government. VimpelCom and
Global Telecom will each take a charge of $2 billion in their
2013 results related to the settlement.

Shares of VimpelCom, which trades in the U.S., rose 8.6
percent to $9 yesterday in New York. Russian stocks gained
yesterday after talks on Ukraine resulted in an agreement aimed
to ease the conflict.

VimpelCom said the transaction gives Djezzy an enterprise
value of 5.6 times earnings before interest, taxes, depreciation
and amortization. Djezzy has a 53 percent market share in
Algeria, the company said.